Australia has experienced significant rises in mortgage costs and sharp declines in housing affordability since it implemented a new tax system of Goods and Services Tax (GST) in July 2000. Previous research attempted to examine the impact of the GST on general price levels, but little research effort has been directed to investigate the impact of the GST on mortgage costs. Using proprietary data of 79 credit unions in Australia for 36 months with 2805 observations, this paper examines the changes of mortgage yield spreads in the pre- and post-GST periods for credit unions. We find that the mutual lenders significantly increased their mortgage charges in the post-GST periods. For example, the increase in effective yield spreads is found to be, on average, 65.1 basis points that are much higher than banks (see Huang and Liu (2009) on Australian banks). The paper also documents that the rise in mortgage yield spreads is not a one-off impact. The findings have important practical economic and policy implications.